Hong Kong is expected to see more than 100 companies going public by the end of 2014 for an aggregate of HK$180 billion, says EY report

Hong Kong equity market is likely to see more listing activities as it enters the fourth quarter, said partner from Ernst & Young LLP (EY).

"The fourth quarter will definitely record higher deal values than the last two months when things had been rather slow. The year-end is usually the best time window for IPOs and several big deals are forming," said Ringo Choi, Asia-Pacific IPO leader of EY.

"In terms of deals volume, we are more optimistic. As the prices of shell companies become more expensive than last year, a lot of small enterprises would prefer initial public offering than backdoor listing," he said.

At the end of June, an EY report estimated that by year-end Hong Kong is expected to see more than 100 companies going public for an aggregate of HK$180 billion.

Though the city recorded only seven companies going public in August and September combined, it is eyeing several big names for the rest of the year.

Having sent in an application on Sept 16, Dalian Wanda Commercial Properties Co Ltd, owned by mainland's second richest man Wang Jianlin, is estimated to raise as much as $6 billion in December at the earliest. CGN Power Co Ltd, one of the country's two new clear power generators based in Guangzhou, also applied for listing on Sept 3 to raise $2 billion. BAIC Motor Corporation Ltd, co-manufacturer of Mercedes-Benz and Hyundai Motor on the mainland, filed on July 2 and was tagged with $1.5-2 billion.

"It's reasonable to take three months (for approval) after applying to the Hong Kong Stock Exchange," Choi said. "It's hard to estimate if the big deals can make it before the year-end. If not, the fourth quarter would probably see lower deal values than last year."

He indicated that as the global low interest rate environment continues, both US and European equity markets are buoyant, distracting global funds and investors from the Hong Kong market. "The current sentiment is not perfect for big IPOs here," he added.

Furthermore, Choi pointed out that as most nation-wide mainland State-owned companies (SOE) have gone public, it's almost impossible to maintain the flow of mega IPOs in Hong Kong in the coming years.

"It has been clear that the years of mega deals are behind us. Now we've entered the era of smaller companies with higher growth. They are what we are eyeing for the future," he said.

Choi said the market is in the rotation of themes this year. "We are in transformation. Investors are shifting to car-leasing business, banks and clean energy recently."

"We expect more sectors benefiting from the ongoing structural reforms on the mainland - such as urbanization, SOE reform, opening of financial market - to debut and win market favor in Hong Kong," he said.

"Healthcare industry particularly is really popular among global capitals at this moment," Choi added. "In the first half, healthcare sector ranked the second in terms of the number of IPO deals in both European and American markets."

"However, by far, we haven't seen the trend emerge in Hong Kong and on the mainland. It's likely that our healthcare facilities, biotechnology and pharmaceutical firms will catch up later as the IPO market in this part of the world usually does. As global investors have been familiar with the theme, it will be easier to lure them," he said.

emmadai@chinadailyhk.com

(HK Edition 09/27/2014 page5)